CENTRAL AMERICA: No Going Back on Growing Trade Ties with China

SAN JOSE, Jan 7 2008 (IPS) - China is threatening to snatch away Taiwan&#39s last remaining allies in Central America. Costa Rica established diplomatic relations with the People&#39s Republic of China on Jun. 1, 2007, after more than six decades of ties with Taiwan, which Beijing considers a renegade province, although it has had an independent government since 1949.

The Chinese ambassador to Costa Rica, Wang Xiaoyuan, said that in a meeting last year held in San José, Honduran President Manuel Zelaya told him that his country&#39s "relations with China are irreversible," including the diplomatic and political spheres as well as trade.

The textile industry in Honduras and Guatemala has attracted private investors from China, but investment in Nicaragua is lower. In Panama, on the other hand, Chinese companies use the Colón Free Zone as a base to re-export their products to other countries. China is also the second largest user of the Panama Canal.

Wang told IPS that diplomatic contacts had been established between China and Panama earlier than with Costa Rica, although San José was the first of the two to formalise relations. Contacts with Panama are being maintained, and hopefully diplomatic ties will be established soon, he said.

In the meantime, China maintains economic and trade representatives in Panama.

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Costa Rican President Oscar Arias first visited China in 2004, when he was as yet only the National Liberation Party&#39s presidential candidate.

Bilateral talks led to the Arias administration officially recognising China last year and simultaneously breaking off relations with Taiwan after 63 years.

China has diplomatic relations with 169 countries while Taiwan is officially recognised by only 24, five of which are in Central America (Guatemala, El Salvador, Honduras, Nicaragua and Panama).

Costa Rica, with a population of 4.4 million, is one of the few countries in the world to have a positive trade balance with China, which has 1.3 billion people. From January to November 2007, bilateral trade stood at 2.6 billion dollars, considerably more than for the whole of 2006, when it totalled 2.1 billion dollars.

Of those 2.6 billion dollars, Costa Rican exports made up 2.1 billion, while Chinese sales were worth 500 million dollars. Most of this trade is in high technology goods and services.

Wang said that trade between the two countries is growing. Between January and May 2007, even before diplomatic relations were established, it increased by 60 percent compared to the equivalent period in 2006, he said.

When Arias visited Beijing again in October 2007, a number of economic, trade and cultural agreements were signed. He also invited Chinese President Hu Jintao to Costa Rica, a trip Hu may make this year.

One of the most important agreements was between the China National Petroleum Corporation (CNPC) and the state-owned Costa Rican Petroleum Refinery (RECOPE).

The agreement covers training of Costa Rican personnel in China, renovation of the refinery in Puerto Limón on the Caribbean sea – which due to obsolete technology only refines 20,000 barrels a day, when its design capacity was for twice that amount – and exploration for oilfields in the Central American country.

Chinese assistance in modernising the refinery will be aimed at doubling its present capacity and will be based "on environmentally friendly advanced technology, in order to reduce greenhouse gas emissions," according to Wang.

"China is very concerned about climate change, and wishes to make an effort along with the other major countries" to reduce pollution which causes global warming, he said.

Meanwhile, preliminary contacts to discuss a free trade agreement between the two countries began in August, when Costa Rican Foreign Trade Minister Marco Vinicio Ruiz travelled to China.

Talks are still focused on the viability of a free trade deal, and formal negotiations are expected "soon," Wang said.

The ambassador said that these negotiations take time: for example, the bilateral free trade agreement between China and Chile, which entered into force in October 2006, "was reached quickly, but it still took a year, and five rounds of negotiations."

According to Wang, between 50,000 and 60,000 Chinese or people of Chinese descent live in Costa Rica, of whom only 2,000 have Chinese passports, many of which are out of date and are being renewed.

Ninety-five percent of the members of the Chinese community are originally from the southern region of Guangzhou (or Canton), the capital of Guangdong province, and the rest are from Taiwan.

"They all gave us a wonderful welcome," said Wang. The embassy opened on Aug. 23, 2007. The Costa Rican embassy in China opened on Oct. 24, to coincide with Arias&#39 visit.